Out-Law News | 11 Sep 2018 | 5:08 pm | 1 min. read
The European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) carried out a monitoring exercise on automation in financial advice (14 page / 601KB PDF) in a continuation of previous reviews of the market.
They found that while ‘robo advice’ seems to be slowly growing, the overall number of firms and customers involved is still quite limited. Risks identified in previous reviews of the sector had not materialised, and due to the limited growth of the market, the ESAs said no immediate regulatory action was necessary.
The review found that automated services were generally being offered through partnerships by established financial intermediaries, rather than pure financial technology firms. New trends included the use of big data, chatbots, and a broader range of products.
The review examined the work done by each of the supervisory bodies and national regulatory authorities in the area of automation in financial advice, as well as carrying out a survey into the current market.
The survey revealed that the market was growing, “although not very rapidly”. Precise figures were not available for all EU countries. A number of national authorities noted that insurance products were being sold through automated services. There was limited use of automation for the sale of banking products.
Some national authorities reported that there were increasing numbers of partnerships between financial intermediaries and fintech companies, some firms were using chatbots for customer service enquiries, and others were developing self-learning automated advice using artificial intelligence.
Barriers to further growth included cultural and psychological barriers, particularly for consumers with low levels of digital or financial literacy. There was also a lack of existing applicable regulation and harmonisation across Europe.
However a number of regulatory authorities were carrying out projects or producing guidance focusing on robo advice, such as the UK Financial Conduct Authority’s mortgage market study.
The European authorities said they would carry out a new monitoring exercise if and when the development of the market and market risks warranted it.